On Top Of The World

meydanFebruary proved another lucrative month for Dubai’s hospitality sector with impressive rises in occupancy, 0.7% to 88.6%, ADR (average daily rate), 10.7% to US$ 300, and RevPAR (revenue per available room), 11.5% to US$ 266. Increases in demand at 7.1% continue to outstrip the 6.3% rise in supply of units but is fast approaching equilibrium.

Currently building two shopping malls on Palm Jumeirah and Deira Islands, Nakheel is planning two more. The one at Jumeirah Village Triangle, at 1 million sq ft, will be twice the size of the other at Jumeirah Village Circle.

At long last, there seems to be some action from Nakheel’s Deira Islands with 94 of 500 plots, ranging from 50k sq ft to 670k sq ft, being released in phase 1. To be located on two of the four main islands, it will be mainly for hotel and resort projects. When completed, this development will have 23k hotel rooms and 31k apartments.

Dubai-based Habtoor Leighton Group, in a JV with Al Jaber Engineering, secured a major US$ 1.7 billion contract in Qatar. The project covers the design and construction of 56 km of the country’s New Orbital Highway and Truck Route, including five main interchanges.

Dubai’s Wasl Properties have completed a three-tower development in Deira, two of which house 217 apartments and the third being a 210-room 4 star hotel.

February was another bumper month for Dubai International with impressive growth in both passenger traffic and cargo. Compared to the same month in 2013, numbers were up 11.7% to almost 5.7 million and freight by 3.4% to 188.7k tonnes.

The troubled Gulf Navigation suffered another blow when it was forced to restate its 2013 results, after it had lost an arbitration case. Having already announced a US$ 190 million loss, it had to add a further US$ 62 million to its bottom line to report a loss of US$ 252 million.

Bahraini asset leasing company, Hanco, has paid US$ 164 million to buy Byrne Investments Limited, including Byrne Equipment Rental and Spacemaker. The long-established Dubai company, formed by Seamus Byrne, is the region’s largest rental company, employing 450 staff.

As part of its cash flow strategy, Dubai International Capital, part of Dubai Holding, is reportedly divesting itself of one of its major assets to raise funds to help with its debt repayment programme. It seems that of the four potential suitors, Clayton, Dubilier & Rice, a private equity firm, is favoured to purchase German-based packaging group Mauser for around US$ 1.5 billion.

Meanwhile, another arm of Dubai Holding, Tecom added another 233 companies in 2013 to bring the total number to over 2,000. It is estimated that an additional 622k sq ft of space was brought on line in Dubai Media City, Studio City and International Media Production Zone, to cope with this expansion.

Ithmar Capital, founded in 2005, expects to expand its portfolio by up to 33% this year. Currently, the Dubai-based private equity firm manages investments of around US$ 800 million and expects new deals to originate mainly from the education and health-care sectors.

One sector of the Dubai travel industry, that is set to expand over the next three years, is medical tourism. Health bosses estimate that revenue generated from this segment could grow from US$ 178 million to US$ 300 million, as numbers increase from today’s 107k to 170k.

A recent study by MasterCard seems to indicate that the UAE has the largest percentage of online shoppers in the region. Some estimate that within five years this sector will generate more than US$ 10 billion with the likes of souq.com and Cobone leading the way. PayPal estimate GCC on-line sales to top US$ 15 billion in 2015 – a 66.7% surge from 2012’s US$ 9 billion.

Apparently with little else to do, the IMF has again flagged the region as prone to a boom / bust cycle. Reiterating its October 2013 report, it considers that the realty sector could become a bubble, if not managed properly, and suggested that regulators, including the Central Bank, take further steps to ameliorate any future problems.

In May, the UAE bourses will be upgraded by MSCI Inc, a US-based provider of equity, fixed income and hedge fund indices. This important reclassification sees the country being moved from Frontier Markets status to Emerging Markets and could result in more than US$ 1 billion being invested locally. The significance of this upgrade is that international investors will be able to trade directly in the local markets.

Next month, Emirates Reit is going public on Nasdaq Dubai with an issue price of between US$ 1.36 and US$ 1.56, valuing the company at between US$ 356 million and US$ 408 million. The Dubai-based real estate investment trust is partly owned by Dubai Islamic Bank (30.9%) and Dubai Holding (27.1%).

Nearly six years after having its shares suspended on the DFM, Amlak is hoping to start trading again later in the year. The outlook for Dubai’s real estate sector is a lot rosier now than it was in November 2008 when villa prices tanked, by as much as 60%, whilst available credit was just an illusion

After a massive 8.2% surge last week, the bourse rose by 1.7% from its Sunday opening of 4306 points to close on Thursday at 4381. Bellwether stocks, Emaar and Arabtec, were trading at US$ 2.68 and US$ 1.62 respectively. The market is already 31.87% up this year.

China’s shadow banking segment is still a major problem for the economy as it continues to expand because of the tight regulations, high interest rates and lending restrictions in the official banking sector. In January, a wealth management fund nearly defaulted which did little to foster consumer confidence. A banking crisis is imminent and collateral damage across the globe is inevitable.

The Crimean squabble between Russia and the West will have a negative effect especially on the European economies. As the political stalemate continues, both sides have upped the rhetoric and imposed sanctions with no apparent appeasement on the agenda. Furthermore the UN Security Council has little or no influence since Russia has the right of veto. The World Bank has estimated that the Russian economy could shrink by 1.8% this year if there is the impasse continues. The cost to the eurozone could be infinitely higher.

With World Earth Day occurring this Saturday, Dubai is using an increasing amount of both electricity and water. The former used saw a 3.3% annual increase to 6,857 MW whilst there was a 3.85% jump in average daily water usage to 296 million gallons. DEWA announced that it will spend US$ 5.45 billion over the next six years on three major projects to ensure that future demand will be met. One of these will be a clean coal plant, costing US$ 3.54 billion with a 1,200 MW capacity.

Coinciding with World Earth Day is the Dubai World Cup, the world’s richest horse race. With 70k spectators filling Meydan to the rafters, and millions watching on global TV, this event adds millions of dollars to the local economy as well as prize pool on the night of US$ 30 million to the winning connections. Watch out for a Dubai winner, either African Story or Mukhadram, or the Irish interloper, Ruler of the World. Whoever wins will be On Top Of The World!

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